Friday, February 8, 2013

Transport Finance without the Feds: The Canadian Model

Transport planning and policy in the United States is dominated
by the federal gas tax. Currently 18.6 cents per gallon of gas and 24.6 cents
per gallon of diesel, federal gas taxes are used to guide preferred transport
investment across the country. For the past forty or so years, the federal gas
tax has, in the words of Lisa Schweitzer, been buying everyone’s lunch. Yet all
is not well. The federal gas tax hasn’t increased in 20 years, reducing the
absolute and relative buying power of the revenue. Increased federal
regulations and interest groups limit what the gas tax can be used for, and a
steady stream of other people’s money (federal dollars) creates incentives to
spend on transport projects that offer few benefits. At an extreme,
transportation projects are developed and financed by federal monies withouteven bothering to claim any transportation benefits.

The declining share of federal money for transport finance has
many people worried that transportation policy and finance will devolve to the
states. Such devolution of authority is viewed as a necessarily lousy outcome,
especially by progressives. (Richard Florida even wants a cabinet position for a Department of Cities. We didn't get urban renewal right the first time, so
let’s try again, but with even more authority.) From my perspective, the status
quo for transport policy and finance cannot be objectively defended as a
success. Looking at the period of about 1971 (the year Amtrak was formed is a
good marker of the beginning of the current era of federal policy, but just
about any year between 1964-1974 works) to present US transport systems
declined in nearly all measures of productivity, economic performance, socialwelfare, or just about anything else you care to measure. For whatever occasional
successes US policy has had, the nation has received an extremely poor return
on investments made. We can do better.

An experiment devolving transport policy and finance to the states
is likely to improve overall performance of all aspects of transport. For evidence
we can look to out chilly northern neighbors in Canada, which does not have
anything equivalent to the U.S. Department of Transportation. Transport policy
is the responsibility of the provinces, and transit policy is the
responsibility of the cities. So how do Canadian cities compare?

Last week a new report on Toronto area transport finance was
published that explains the financing structures in place there and potential
future monies. Here is a link to the report. The authors promote many taxes and
fees, all of which are economically sound and focus on raising money for
transport by charging those who benefit from a well-functioning transport
system. Essentially, if the Greater Toronto Hamilton Area needs new transport investment
to maintain and improve economic competitiveness then they can and should raise
the money locally.

TransLink is the multi-modal
transportation organization for Greater Vancouver, BC, and it is unlike what we
see in the States. It is in fact, closer to the idea described inEnterprising Roads,
a transportation utility with autonomy constrained by oversight.One
of the key points to consider is that metropolitan Vancouver has a transit mode
share of 21%, comparable
with much larger Toronto and Montreal (though behind metro New York's 30%, it
is well ahead of Seattle's 9%), despite ranking34thin population. Some of that has to do
with institutional factors and governance.

In addition to service innovation and the ambitious expansion plans in Toronto, British Columbia instituted a carbon tax a few years ago, though this may not survive a scheduled vote in May. There are certainly problems with the decentralized system. Some Canadians want a national transit agency. Fragmented governance in regions makes coordination difficult, and perhaps a stronger regional agency is needed. Most difficult, perhaps, is that many cities forego transit service all together.* However, eliminating unproductive transit so that resources can be used elsewhere is actually good policy. But by nearly every measure Canadian transport policy outcomes are superior to US outcomes. Whether US transport finance and policy devolves to the states remains to be seen, but it certainly isn’t something that should be dismissed as inferior to what we have now. It may well be better.

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*This sentence was removed as it is incorrect (I had bad info on this case, but the larger point remains):"The city of Guelph, for instance, has 120,000 people but no bus service. "

Compare this to the US FTA's biggest projects:New York East Side Access: 35% of costs paid by feds;New York Second Avenue Subway: 27% of costs paid by feds;Honolulu Rail Transit: 30% of costs paid by feds;Los Angeles Westside Subway: 42% of costs paid by feds;Seattle University Link: 42% of costs paid by feds;Silicon Valley BART: 39% of costs paid by feds.

There is no doubt in my mind that Canada has been more successful than the US in encouraging transit ridership. But to argue that this results from a lack of national-level aid in Canada does not seem to be reflective of reality.

Moreover, while the Canadians may not have an equivalent to the US DOT, the policy-making influence of the US DOT on transportation projects is quite exaggerated. US cities, which are expected to fund half or more of the costs of their transit lines, play by far the most important role in determining what should be built.

Most importantly, perhaps, the major criticism of decentralizing transportation funding in the US is that, unlike Canada's provinces, our states have shown themselves to be quite reluctant in funding non-automobile transportation and quite gung-ho about spending plenty of their own money on new, highly inefficient and environmentally damaging highways.

The problem with US transport planning, to me, is primarily an ideological issue, not a structural one.

Canada has a couple of advantages over the US. The biggest one is that it traditionally lagged US trends; in particular, by the time it got around to demolishing city neighborhoods to build freeways, the freeway revolt movement had already matured and could stop most urban freeway construction. Vancouver's only freeway within city limits skirts the edge of the city to connect two suburbs; Toronto has more freeways but still much less of that infrastructure than New York or Chicago or Washington or San Francisco.

This meant that the postwar reduction in transit use in Canada was much smaller than than the one in the US. It's lack of federally funded roads more than local funding of transit that made the difference.

More recently there has also been a divergence with quality of investment - Canadian construction costs are much lower than American ones and the projects funded tend to be more optimal for each city. This can't really be attributed to federal funding, though, since the biggest duds are usually supported locally by suburban honchos. For example, BART to San Jose got a Not Recommended rating from the FTA, but is moving forward anyway because both BART and San Jose want it. In Vancouver there's also another factor, which is better zoning; this again not a federal funding question but entirely one of local priorities and willingness to upzone aggressively near train stations.

Yonah-I'm not arguing that the Canadian decentralized model directly caused better transit ridership outcomes. I don't have evidence supporting causal claims (yet, anyway, as I may pursue research along these lines). I am saying that 1) the US model has produced poor results relative to investment, and 2) the decentralized approach as employed in Canada features outcomes (at least ones that I care about) that are better than similar measures in the US.

I don't say that devolved finance and policy means that the feds won't spend any money on transport. I don't believe that is the case, even if the gas tax goes away completely. As for cities and regions not spending money on non-auto transit, the incentives to do so will change if policy and finance are devolved. Of course, the details of how this happens and the speed it is implemented matter quite a bit. It may be that a devolved policy apparatus is not better than what we have. But a smaller federal role isn't obviously something to fear, either.

Yonah – there are ways for the federal government to influence policy that don't involve straight subsidies. One way is through the forced creation of MTOs...in the Bay Area the regionalism has manifested in the MTC's bias towards shitty suburban extension.

It's also possible (though I have no idea how true) that the Canadian federal government just hands over the money for whatever projects the local governments want, whereas in the US the federal government is more involved in steering the process. For example, the feds eventually changed their minds about BART to San Jose Flea Market after VTA added, among other things, more parking at the protestation of local planners, who wanted TOD closer to the station. If they had just handed over the money, BART to the Flea Market still would have been a shitty project, but Milpitas might have gotten marginally more TOD.

Also, fun fact: the feds are paying for about two-thirds of the Central Subway.

Other major factors to consider here are Canada's higher gas taxes, which studies have shown to have reduced sprawl in Canadian Metro areas, as well as our lack of the home mortgage tax deduction. All of these policies have supported higher transit ridership.

In response to Yonah and Stephen's comments, Canadian federal funding has been on a one-off basis and I am not aware of them playing a major role at all in shaping projects to meet their needs. All of the recent examples Yonah highlights have back stories and should be seen as the exception and not the rule.

Vancouver's Canada Line was a P3 partnership, a model the feds wanted to advance, and the line connected to an airport (federal) and was the flagship project for the 2010 Olympics.

Many people would argue the reason why Ottawa got so much money for their LRT line was because that's where the Feds are -- in Ottawa.

Toronto's subway extension is a little different because one of the main impetuses for federal involvement was that this was the first subway line to cross a municipal border and that it would be a demonstration of a 33%-33%-33% split between local-provincial-federal funding.

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About Me

David King is an Assistant Professor of Urban Planning.His research explores the impact of local
transportation planning on the built environment, public finance, social equity
and accessibility.As part of this
research he has written about the phenomenon of cruising for parking and used
spatial regression techniques to analyze travel behavior.He also studies how public policy influences
the adoption of new technologies to address congestion, energy and
environmental concerns.These issues are
the focus of Professor King’s teaching through his courses covering planning
techniques and methods, transportation and land use planning and transport
policy.